Startups must have a solid understanding of the financial basics. If you’re trying to secure money from bankers or investors, key startup accounting records like income statements (income and expenses) and financial projections will help persuade others that your idea is worthwhile to invest in.
Financials for startups often come down to a basic formula. You have cash or you’re in debt. Cash flow can be a challenge for small businesses. It’s important to monitor your balance sheet and not overextend yourself.
As a start-up you’ll probably need to seek out debt or equity financing in order to grow your company and make it profitable. Investors typically consider your business model including projected costs and revenue and the possibility of earning a profit from their investment.
There are numerous ways to bootstrap a startup such as obtaining an enterprise credit card that offers the introductory rate of 0% to crowdfunding platforms to help a new business. But, it’s important to be aware that using credit cards or debt may harm your personal and business credit score. You should always pay off your debts in time.
Another option is to take money from family and friends who are willing to invest in your company. This could be a good option for your business, however you should always write the terms in writing to avoid any conflicts and ensure that everyone understands what their contribution will impact your bottom line. If you offer an individual shares of your company, they’re considered an investor, and thus need to be governed by securities law.